Professional Paraplanner’s TDQ (Training, Development and Qualifications) series, is run in conjunction with key support providers, such as Brand Financial Training, and aims to test your knowledge of the financial services market, as part of your overall training goals and exam techniques.
The following questions, which can also be found in our July/August 2021 issue, relate to examinable Tax year 20/21, examinable by the CII until 31 August 2021.
QUESTIONS
1. What is the purpose behind a firm’s ethics code?
A. Sets out the firm’s ethical commitment in high level terms, and often also includes more specific regulations for specific responsibilities
B. Details the investment processes for clients wishing to consider ethical investment
C. To specify the rules of conduct the firm expects from all advisers
D. To visually demonstrate, to all staff, the commitment via internal promotion e.g. intranet sites, staff room posters
2. Marcus is reviewing his portfolio with the help of his financial adviser. He has gross earnings of £55,000 and has held a UK life assurance bond for 10 years, which is showing a gain of £40,000. Which of the following might be reasons for Marcus to retain the investment rather than encashing now? Tick all that apply.
A. Marcus is a higher rate taxpayer, so he will not benefit from top slicing.
B. His personal savings allowance cannot be offset against the gain.
C. Marcus is retiring in 12 months, at which point, he will be a basic rate taxpayer.
D. Marcus has used his CGT annual exempt amount, so he will pay CGT at 20% on the gain.
3. William took out a Long-Term Care bond some years ago, but investment performance has been poor, and the insurer has recommended a further contribution, which William CANNOT afford to do. What is the likely effect on the plan?
A. The insurer will look to cancel the Long-Term Care cover and encash the bond
B. It will continue but may not provide for the full cost of care fees if William makes a claim
C. Long-Term Care cover will cease but the bond will continue as an investment only
D. It will continue but will only pay out in the case of a residential care requirement and not for domiciliary care
4. Lynne and her husband are considering letting a room in their house. Which of the following is true regarding letting rooms in their main residence? Tick all that apply.
A. Where gross rent in a year is not more than £7,500, they will not be charged to tax.
B. Rent a room relief will not apply if the accommodation is unfurnished.
C. Rent a room relief is automatic.
D. Lynne and her husband can both claim rent a room relief of £7,500.
E. They can let the room for business purposes and claim rent a room relief.
5. Amanda has recently joined her employer’s qualifying workplace pension. What is the current total minimum level of contribution under auto-enrolment?
A. 13% of total earnings
B. 10% of qualifying earnings
C. 9% of total earnings
D. 8% of qualifying earnings
6. Your client Clive is interested in investing directly in the stock market rather than indirectly via, a collective investment scheme. He asks what is the optimum number of securities he should hold in order to eliminate most of the investment-specific risk in his portfolio. You tell him between:
A. 5 and 10.
B. 15 and 20.
C. 25 and 30.
D. 35 and 40.
7. A non-investment grade corporate bond is trading at a spread of 300 basis points over a 10-year gilt. If the gilt has a gross redemption yield of 3%, what will the yield be on the corporate bond?
A. 3.3%
B. 3.9%
C. 4.%
D. 6%
8. A mortgage is distinguished from an absolute assignment by a right known as the:
A. law of reassignment
B. equity of redemption
C. repayment of security
D. power of retention
9. If someone considering equity release wants to ensure that they can move house in future, which type of contract should they generally avoid?
A. Drawdown mortgage
B. Home Income Plan
C. Full Home Reversion Plan
D. Shared Appreciation Mortgage
10. The interest rate that banks charge each other is known as the:
A. London Inter-Bank Offered Rate.
B. Inter-bank Swap Rate.
C. London Banks Swap Rate.
D. The London Banks Offered Rate.
